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High street store closures outweigh openings as consumers turn online to buy

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More high street shops closed on British high streets in the first half of this year than opened,  taking the overall decline to a five-year low. 

A total of 2,692 stores closed on the top 500 UK high streets between January and June, according to research compiled for PwC by the Local Data Company. That’s a rate of 14 a day. The closure rate is similar to that detected by the research in previous years – in the first half of 2016, for example, stores closed at a rate of 15 a day. But the rate at which new stores are opening is now lower – at 1,569 in the first half of 2018. That takes the overall decline to a net 1,123 store closures in the first half – the highest rate in five years and well above the net loss of 222 stores at the same time last year – , which suggests the change is being driven by factors including the growth of online shopping. 

The online effect

The research tracked 66,961 outlets in 500 town centres between January 1 and June 30 2018 and found that closures were most marked in categories that had been affected by online shopping, such as fashion and electrical stores, while restructuring activity and service digitisation were also marked. The closure of Maplins stores, following that retailer’s administration, had a marked effect, since more than 50 of those outlets were on the top 500 high streets.

Other findings include a move to eating, drinking and entertaining at home, affecting restaurant, catering and entertainment companies which lost a net 340 stores over the period. Bars and bookmakers also closed.

Lisa Hooker, consumer markets leader at PwC, said: “Our latest research highlights the challenges facing the retail and leisure sectors on Britain’s high streets. The continued rate of store closures reflects the new reality that many of us prefer to shop online and increasingly eat drink and entertain at home. The high street is adapting to an overcapacity of retail and leisure space resulting from these channel shifts.” She added: “The British high street is in urgent need of new ways of thinking and new forms of retail. Encouraging this should be a priority, and it remains to be seen if recent packages of support for the high street and reductions in business rates for smaller retailers will be sufficient to stimulate this.”

In detail

The figures showed that fashion shops (-104 stores, net), pubs and inns (-99) and electrical retailers had been the hardest hit in the first half of the year, while supermarkets, booksellers and ice cream parlours were the most successful, opening a net eight stores in each category. Georaphically, the largest number of net closures was in Greater London (-268), of which half were operated for leisure uses, and the smallest number was in Wales (-22). 

Zelf Hussain, retail restructuring partner at PwC, said the changes now being seen in the UK high street raised questions about how legacy and leisure operators should restructure – questions that often required immediate answers. He said that in 2018 there had been a spike in CVAs. “We believe that CVAs can be helpful restructuring tools but alone are insufficient. Our own research of more than 101,710 companies listed Companies House shows that of the 65 retailers entering into a CVA between 1987 and 2017, more than half (51%) failed, leading to another insolvency process.

“With the impact of some recent announced CVAs yet to feed through, alongside the peak time period for new CVA announcements being the first quarter of the New Year, we should brace for more high street closures in the coming months.”

An inflexion point

Lucy Stainton, senior relationship manager (retail) at The Local Data Company, said: “The performance of the physical UK retail sector has well and truly passed an inflexion point. While there are still many examples of sectors and brands which remain resilient to market challenges, it would be remiss not to acknowledge the increase in sore, closures, seen especially in the first half of 2018 when the gap between openings and closures has widened significantly.

Retailers and leisure operators alike are frantically trying to adjust their business models and concepts to meet evolving consumer habits. Arguably in part these latest figures reflect both; businesses which have struggled to meet consumer demand, but also conversely those operators who are actively managing and reducing their portfolios to ensure their estate remains fit for purpose.”

Commenting on the report, Anil Gandharve, senior vice president and head of retail, CPG and manufacturing at technology consultancy Mindtree, said the report was evidence of the changing habits of consumers.

“It’s sad to see 14 shops disappearing from the UK high street each day but it does highlight stores as bearers of significant cost, which inevitably drives focus to improving efficiencies,” he said. “Businesses need to reimagine the high street store to better align with consumer expectations. Stores should be transformed into experience centers that can deliver customised experiences efficiently and drive value from data analytics. Better use of technology could also help to avoid loss of inventory, which is one of the main concerns in physical retail.”

Image: InternetRetailing Media/Paul Skeldon

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